Dernham Inc.

Income Statement For the Year Ending on December $31($Millions of dollars$)$

$\backslash$table$[[,$Year $2,$Year $1],[$Net Sales,$4,445,3,500],[$Operating costs except depreciation and amortization,$1,855,1,723],[$Depreciation and amortization,$222,140],[$Total Operating Costs,$2,077,1,863],[$Operating Income $($or EBIT$),2,368,1,637],[$Less: Interest,$237,213],[$Earnings before taxes $($EBT$),2,131,1,424],[$Less: Taxes $(40\%),852,570],[$Net Income,$1,279,854]]$

Calculate the profitability ratios of Dernham Inc. in the following table. Convert all calculations to a percentage rounded to two decimal places.

$\backslash$table$[[$Ratio$,$Value$],[$Year $2,$Year $1],[$Operating margin,$53\mathrm{.}27\%vv,46\mathrm{.}77\%$

Profitability ratios

Profitability ratios help in the analysis of the combined impact of liquidity ratios, asset management ratios, and debt management ratios on the operating performance of a firm.

Your boss has asked you to calculate the profitability ratios of Dernham Inc. and make comments on its second$-$year performance as compared to its firstyear performance.

The following shows Dernham Inc.$\text{'}$s income statement for the last two years. The company had assets of $$8,225$ million in the first year and $$13,157$ million in the second year. Common equity was equal to $$4,375$ million in the first year, and the company distributed $100\%$ of its earnings out as dividends during the first and the second years. In addition, the firm did not issue new stock during either year:

Dernham Inc.

Income Statement For the Year Ending on December $31($Millions of dollars$)$

$\backslash$table$[[,$Year $2,$Year $1],[$Net Sales,$4,445,3,500],[$Operating costs except depreciation and amortization,$1,855,1,723],[$Depreciation and amortization,$222,140],[$Total Operating Costs,$2,077,1,863],[$Operating Income $($or EBIT$),2,368,1,637],[$Less: Interest,$237,213],[$Earnings before taxes $($EBT$),2,131,1,424],[$Less: Taxes $(40\%),852,570],[$Net Income,$1,279,854]]$

Calculate the profitability ratios of Demham Inca in the following table. Convert all calculations to a percentage rounded to two decimal places.

$\backslash$table$[[,$Value$],[$Ratio$,$Year $2,$Year $1],[$Operating margin,$53\mathrm{.}27\%vv,46\mathrm{.}77\%$